Recession or not: how to make 2023 a good year anyway?

When it becomes more difficult to achieve topline objectives, we quickly switch to survival mode. Retailers often try to protect their margins by cutting costs. This was also the approach of most retailers we surveyed. While this seems like the right reflex, there is one crucial condition: do not change the perceived value for your target audience.

In a warehouse for garden tools, reducing the frequency of the cleaning crew may not drastically impact the customer experience. However, in a high-end boutique, that same decision could become a fundamental problem. Avoid the trap of cutting costs across the board. From a management perspective, this may seem like an easier and more widely accepted approach, but it almost certainly means cutting too deeply in areas that customers value—risking a negative reaction.

Use times of crisis (like now) to identify unnecessary costs—expenses that may have been relevant in the past but now linger unnoticed in the many lines of your budget files. Take a critical look at slow-moving products or those that offer little added value. Also, don’t forget to evaluate your services. Shopper expectations are constantly evolving, and a service you once offered might no longer be relevant today.

Under pressure, we tend to choose what is measurable and therefore provides more certainty. During a crisis, traditional media budgets—often valued using old-school methods—come under increased scrutiny. As a result, businesses quickly shift towards digital media, which are perceived as ‘cheaper.’

However, in times of crisis, your target audience seeks security. The shift towards A-brands during the COVID-19 crisis was a clear example of this. Strong brands are a part of daily life, and traditional media help maintain that strong presence. So, be critical and use this moment to evaluate your media mix—not just based on cost, but by putting yourself in your audience’s shoes and considering what truly influences them.

It has been proven that in a crisis, there is a greater multiplier effect between ‘share of voice’ and market share growth. And to increase your ‘share of voice,’ you don’t necessarily have to invest more—it depends on your competitors. A crisis can, therefore, be an opportunity to grow market share at a relatively low cost.

Additionally, continue investing in your relationship with shoppers. All initiatives that enhance transparency, accessibility, and trust will strengthen customer relationships—helping you win, especially during a crisis.

The first priority is, of course, your existing customer base, as they are the easiest way to ensure cash flow. The retailers we surveyed shared this view. However, almost everyone will reassess their spending patterns when economic conditions become more challenging. Some will opt for cheaper substitutes to make ends meet, while others will approach purchases differently due to lower-than-expected returns on their investment portfolios.

It is therefore essential to reevaluate your offerings and strategies based on an analysis of your target audience, rather than solely relying on sociodemographic data or past consumer behavior. In times of crisis, these behaviors change. Use tools like empathy mapping to uncover new ‘pains’ or ‘gains.’

Also, consider how essential your offerings are. A reduced disposable income forces consumers to make choices. On the one hand, demonstrating empathy through pricing strategies, promotions, or tone of voice can foster greater loyalty in both the short and long term. On the other hand, while a postponed purchase may be frustrating, it also presents an opportunity for a future sale.

What should you do when your most loyal customers want to spend 20% less? Will your manager or shareholder be willing to swallow that bitter pill? We suspect the answer is no. So in a crisis, it is extra important to recruit. But then, of course, it must be even more cost-effective than usual. Therefore, focus - and this may surprise you - on the switchers. That's the low hanging fruit that you can easily guide through the funnel without huge budgets. You can look at switching in two ways. There are, of course, the customers who choose your store one time and another, because of an attractive promotion or because they like both your cashier and your competitor's. In addition, you have loyal customers who buy a lot from you, but a particular product or specific category somewhere else. How can you entice them to modify their behavior? What are they looking for? Put yourself in the shoes of these switchers and analyze how to better show them the value of your offerings.

Also align your promo or merchandising plan with the changed context and strategy. It's natural that a 1+1 promotion on a well-known product will attract attention. But be aware of the implications. On the one hand, you are influencing the value perception of the customer you just attracted; on the other hand, that customer can just as easily be enticed back by your competitor. Not to mention the margin skimming that such promotions can cause. Use promotions smartly. Maybe you should highlight a product here and there that you normally sell less to attract switchers. This can be done in your newsletter or in a newspaper ad, but certainly also by giving it more space on your homepage, your window or shelf space.

The art of good marketing starts with properly understanding your target audience. Not "what do they need," but "why do they need something. When times get tougher economically, this is even more important. So keep investing in market research. It is important to sound out what drives your target market. And let this live in your organization. Avoid ego thinking that puts your short-term returns first, but put the lives of your customer and target group first when you have to make decisions. You will reap the benefits of that empathy both during and after the crisis. In a context where your target group is also increasingly looking at the behavior of brands and companies with a magnifying glass, this is even more true.